I would like to thank the editor, Pok-sang Lam, and two anonymous referees for their helpful comments and suggestions. All remaining errors are my own.
The Determinants of Future U.S. Monetary Policy: High-Frequency Evidence
Version of Record online: 22 MAR 2010
© 2010 The Ohio State University
Journal of Money, Credit and Banking
Volume 42, Issue 2-3, pages 399–420, March - April 2010
How to Cite
TAYLOR, N. (2010), The Determinants of Future U.S. Monetary Policy: High-Frequency Evidence. Journal of Money, Credit and Banking, 42: 399–420. doi: 10.1111/j.1538-4616.2009.00292.x
- Issue online: 22 MAR 2010
- Version of Record online: 22 MAR 2010
- Received September 24, 2007; and accepted in revised form September 4, 2009.
- federal funds futures rates;
- macro-economic announcements;
- information flow
This paper examines the determinants of future U.S. monetary policy by studying the relationship between a predictor of the future direction of monetary policy and a pertinent information set. Specifically, we investigate the impact of the surprise component of an array of macro-economic announcements upon federal funds futures rates. This investigation is conducted using high-frequency intraday data in order to examine the exact timing of rate reactions to announcements. In doing this, we find that Non-farm Payrolls and Civilian Unemployment announcements play a dominant role in determining future monetary policy. Moreover, we document evidence that shows that the release of such information is rapidly incorporated into rates, particularly when considering federal funds futures contracts traded via an electronic trading platform (as opposed to an open-auction trading platform).